Deadline nears for reorganization plan in CSN Houston case

Wednesday could be a significant day in the Comcast SportsNet Houston case.

June 4th will mark 120 days since U.S. District Judge Marvin Isgur placed the network’s parent company, Houston Regional Sports Network, under Chapter 11 bankruptcy petition. As such, it’s the deadline for Haynes and Boone, the law firm that was appointed by the court to represent HSRN, to submit a plan of reorganization to the court.

Chapter 11, as those of you who have been following the case recall, allows a financially troubled entity to stay in business while it reorganizes its affairs. The entity has an exclusive 120-day period to file a plan of reorganization, and the deadline in this case arrives Wednesday.

Henry Flores, who along with colleague Charles Beckham handles the case for the law firm’s Houston office, said he would not have any comment on the firm’s plans in the CSN Houston case.

Based on past court proceedings, however, it would not be a surprise for the reorganization plan to do away with the unanimous consent rule that requires all three network partners – Comcast, the Astros and the Rockets – to agree on matters of significance, including carriage agreements.

The plan also is supposed to outline a path to profitability for the network, so perhaps it will include proposals for capital infusion from current network partners or perhaps new partners.

As usual in this case, the unknowns outweigh the known factors. It is likely that the Astros would oppose an end to the unanimous consent rule, but that decision could wind up in Isgur’s hands.

Also a mystery is Comcast’s intentions. The network initially said it would enter a stalking horse bid to purchase the network out of bankruptcy but reversed field in March.

“Comcast initiated this bankruptcy proceeding in the belief that the Chapter 11 process would permit the network to reorganize, thus preserving the network’s value and the jobs of many employees,” the network said. “Much has happened, however, in the nearly six months since this involuntary case was filed. In view of these developments, Comcast is no longer prepared to purchase the network.

“Comcast remains open to considering any proposal by the debtor for reorganizing the network successfully in Chapter 11, including through an auction or through further efforts to obtain additional carriage.”

None of the parties have commented on what to expect Wednesday. Things have been quiet on the CSN Houston front recently, so perhaps work has been taking place behind the scenes with potential investors.

Rockets CEO Tad Brown said in January that the team had met with representatives of several companies, including Fox Sports, Time Warner (which subsequently announced a merger deal with Comcast), DirecTV, AT&T (which subsequently announced plans to buy DirecTV), entertainment conglomerate AEG and private equity companies, including KKR & Co., Providence Equity Partners and Guggenheim Partners. There have been no public discussions of the matter, however, since February.

Meanwhile, there are a few other developments in the CSN Houston saga and its related cases, and, no, none of them will have an impact on when or if those of you don’t have access to the channel will get it.

Attorneys for Comcast and former Astros owner Drayton McLane have filed motions asking that the suit filed against them by Astros owner Jim Crane’s Houston Baseball Partners ownership group be heard by U.S. District Judge Lynn Hughes, not by Bankruptcy Judge Marvin Isgur.

Comcast says the issues in the case, in which Crane and his partners accuse McLane and Comcast of conspiring to withhold information about CSN Houston from Crane during negotiations to sell the team, are “non-core” to the bankruptcy case and thus should be moved to district court. They also say that moving the case to Hughes’ court would expedite the bankruptcy process, and they note that Houston Baseball Partners has requested a jury trial in the case.

McLane’s attorneys support moving the case to Hughes’ court, in part because Isgur has said he lacks jurisdiction to hear a breach of contract charge against McLane Champions, the corporate name for the entity that owned the Astros when they were owned by the McLane family. Hughes, they say, would have authority to hear the entire case.

“Subjecting McLane Champions, to two separate lawsuits, one in state court and one in federal court, both of which arise out of the same transaction and the same operative facts, would not promote judicial economy,” McLane’s attorneys argue.

The Astros, meanwhile, want the case moved back to state court, where it was filed last fall.

In a separate matter, McLane Champions has filed suit in federal court in Waco against National Union Fire Insurance Co. of Pittsburgh. McLane claims that National Union has failed to meet the terms of a policy purchased by McLane Champions that provides coverage for management liability, professional liability and other causes.

Next up on the court calendar is a June 12 status conference and a June 23 hearing on the Houston Baseball Partners lawsuit. Both are scheduled before Isgur.